Agency officials said the new law—signed by President Donald Trump earlier this year—will significantly affect federal taxes, credits, and deductions.
The Internal Revenue Service (IRS) is urging Americans to begin preparing now for the 2026 filing season, noting that broad tax-law changes, newly adjusted benefit thresholds, and a phaseout of paper refund checks will make early organization critical for filing accurate returns.
On Nov. 26, the IRS launched its annual “Get Ready” campaign, encouraging taxpayers to review the latest updates tied to the One Big Beautiful Bill Act and other changes that take effect in the coming months. Agency officials said the new law—signed by President Donald Trump earlier this year—will significantly affect federal taxes, credits, and deductions.
“A little advance work preparing paperwork and organizing information now can help with filing tax returns quickly and accurately,” the agency said in a statement, adding that the Nov. 26 notice is the first in a series of reminders it intends to publish to help taxpayers get ready for the upcoming filing season.
The announcement notes that Treasury and the IRS are still releasing implementation details on the One Big Beautiful Bill Act, which introduces several major deductions for tax years 2025 through 2028, including no federal tax on tips, overtime pay, and car-loan interest, as well as a new temporary deduction for seniors and certain other groups.
New Deductions and Emerging Guidance
The IRS issued detailed instructions on Nov. 21 on how workers can calculate the new deductions for tips and overtime amounts. The guidance explains several methods employees may use to determine qualified tip amounts, depending on how their employer reports them on Forms W-2, 4070, or Form 4137. The agency also said that only workers in occupations that “customarily and regularly” receive tips will be eligible for the new deduction.
Roughly 6 million Americans report tipped wages each year and will need to follow the new rules. The overtime deduction, meanwhile, applies only to employees covered by the Fair Labor Standards Act, with the allowable amount tied to how employers itemize overtime premiums on earnings statements.
States are also moving in parallel. Texas, Wyoming, Florida, and Michigan have adopted their own exemptions for tips and overtime pay at the state level. Federal officials have hinted that more relief may be coming: Trump has said tariff revenues could eventually support a dividend for taxpayers, while Treasury Secretary Scott Bessent has suggested that lower taxes may also be used to distribute that benefit.
By Tom Ozimek
